Template:M summ 2002 ISDA Specified Entity: Difference between revisions

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{{isdaprov|Specified Entity}} is so (~ cough ~) important that it is literally the first thing you see when you regard an ISDA {{isdaprov|Schedule}}.
{{isda Specified Entity summ|isdaprov}}
 
Painstakingly set out, separately for {{isdaprov|Events of Default}} (namely {{isdaprov|DUST}} (Section {{isdaprov|5(a)(v)}}), {{isdaprov|Cross Default}} (Section {{isdaprov|5(a)(vi)}}) and {{isdaprov|Bankruptcy}} (Section {{isdaprov|5(a)(vii)}}) and the one {{isdaprov|Termination Event}} (Credit Event Upon Merger (Section {{isdaprov|5(b)(v)}}  — as if you would want different Affiliates to trigger this event depending on precisely ''how'' they cork-screwed into the side of a hill), and jointly for the “{{isdaprov|Absence of Litigation}}” representation in Section {{isdaprov|3(c)}} of the {{2002ma}}.
 
A {{isdaprov|Specified Entity}} is any affiliate (or, in theory at any rate, even a non-affiliate, if your risk officer is a total cretin) of a counterparty to an {{isdama}} which is designated in the relevant Schedule.
 
It is relevant to the definition of {{isdaprov|Cross Default}} and {{isdaprov|Default under Specified Transaction}} in that it widens the effect of those provisions to include defaults by the parties specified.
 
===Nominating {{isdaprov|Specified Entities}} for yourself has its upsides===
{{isdaprov|Specified Entity}} widens the scope of those provisions also to include defaults ''by'' the other side (and its {{isdaprov|Specified Entities}}) under their contracts with ''your'' {{isdaprov|Specified Entities}} — so there ''is'' some benefit to naming ''your'' [[affiliates]], friends and relations as {{isdaprov|Specified Entities}}. But given how unlikely you are to be actually monitoring how a counterparty performs with an affiliate, it’s more of a false comfort than a real one.

Latest revision as of 15:54, 2 February 2022

A Specified Entity is any affiliate of a counterparty to an ISDA Master Agreement which is designated in the relevant Schedule.

It is relevant to the definition of Cross Default and Default under Specified Transaction in that it widens the effect of those provisions to include defaults by the parties specified.

It is so (~ cough ~) important that it is, literally, the first thing you see when you regard an ISDA Schedule.

The same concept in both versions of the ISDA Master Agreement only with different clause numberings. Specified Entity is relevant to:

And of course the Absence of Litigation representation. Let’s not forget that.

Each party designates its Specified Entities for each of these events in Part 1(a) of the Schedule, which gives the Schedule its familiar layout:

(a) “Specified Entity” means in relation to Party A for the purpose of:―

Section 5(a)(v), [SPECIFY].
Section 5(a)(vi), [SPECIFY].
Section 5(a)(vii), [SPECIFY].
Section 5(b)(v), [SPECIFY].

and in relation to Party B for the purpose of:―

Section 5(a)(v), [SPECIFY].
Section 5(a)(vi), [SPECIFY].
Section 5(a)(vii), [SPECIFY].
Section 5(b)(v), [SPECIFY].

Now, why would anyone want different Affiliates to trigger this a Event of Default depending precisely upon how they cork-screwed into the side of a hill? Well, there is one reason where it might make a big difference when it comes to Bankruptcy, and we will pick that up in the premium section. But generally — and even in that case, really — in our time of variation margin it really ought not to be the thing that is bringing down your ISDA Master Agreement.

Note it also pops up as relevant in the “Absence of Litigation” representation in Section 3(c) of the 2002 ISDA.

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